State borrows Sh45bn as T-bill rates fall for seventh straight week

The high demand for short-term government securities continued last week amid high liquidity, pushing interest rates lower for the seventh straight week.

Central Bank of Kenya (CBK) said investors bid a total Sh65.17 billion in last week’s auction for 91,182 and 364-day Treasury bills against the advertised Sh24 billion, an equivalent of 271.54 percent subscription rate.

The government took up Sh45.5 billion, and with maturities of Sh20.8 billion due, ended up with new Sh24.7 billion borrowing.

Interest rates on the papers, which are already at seven-year lows, declined further in what analysts say is an indicator of the increased competition among investors for a piece of the pie in an economy that is offering few returns outside of the fixed income segment.

The interest rate on the 91-day paper fell to 6.01 percent from 6.27 percent in the previous auction, while that of the 182-day paper declined to 6.52 percent from 6.76 percent previously.

On the 364-day paper, the rate last week stood at 7.46 percent, down from 7.7 percent in the previous auction.

Investor appetite has shifted to the shortest tenor paper in the last two auctions, contrary to the trend previously when the one-year T-bill was the most popular.

“The stock market has been subdued and investors want to stay near cash-out possibilities because yields will be higher hopefully towards the end of the year,” Genghis Capital head of securities Kenneth Minjire said last week.

The 91-day T-bill however attracted Sh29.88 billion bids last week, higher than the Sh24.5 billion offered for the 364-day paper and Sh10.8 billion for the 182-day tenor.

The government is also in the market for Sh60 billion through a Treasury bond whose sale closes tomorrow.

The rare three tenor bond—offered in five, 10 and 15-year tranches— is tipped to attract healthy demand, especially on the five-year option which is likely to be popular with banks.

The CBK is likely to absorb more funds on the longer tenors though as it continues efforts to lengthen the maturity profile of domestic debt.